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Assessed Home Values Rarely Equal Fair Market Value

By
Real Estate Agent with RE/MAX Executive Realty 91362

Over the last few years in Massachusetts as well as many other parts of the country we have seen a rapid decline in Real Estate values. In many towns around Metrowest Massachusetts it would not be unusual to see a home that sold in 2007 for $500,000 to be re-sold today around $450,000. It is an unfortunate fact of life. All good things tend to come to an end at some point.

One of the common lines of thinking that occurs when Real Estate values are heading downward is that the home owners tax bill must also be coming down too. Part of this misconception occurs because people assume that the fair market value and assessed value are the same.

In theory this should be the case but assessed values are nothing more than a yard stick for a municipality to collect an appropriate amount of taxes to sufficiently cover the state and local appropriations chargeable to the city and town.

 

 

Lets go over a few facts about your homes assessed value and the role of the towns assessor:

Assessed and fair market value of homes1.) In Massachusetts assessed values are based on 100% of full market value.

2.) Town Assessors are required to submit assessed values to the state Department of Revenue for certification every three years.

3.) The assessors review sales data and the Real Estate market every year and thereby reassess values each year.

4.) Assessors do not raise of lower taxes.

5.) Assessors do not make the tax laws which affect property owners.

6.) The Assessor's Office has nothing to do with the total amount of taxes collected.

7.) The assessor's primary responsibility is to find the full and fair market value of the property so that the taxpayer pays only their fair share of taxes.

 

As we head toward January, there is no doubt that you will see the assessed value of many homes coming down across Massachusetts. What you are also very likely to see is an increase in the fiscal tax rate to cover the difference in the lower assessed values.

As previously mentioned above, the numbers used are all just part of the game of collecting the proper amount of revenue to run the town.

So what are you supposed do if you think you are not being taxed properly in relation to other similar homes that have sold?

You should go to your local tax assessors office and file for an abatement. All the information necessary regarding the application process and the deadlines for filing should be available.

Applications for abatement's are due on or before the due date for payment of the first actual bill. The assessor has up to three months in Massachusetts to act upon your abatement request.

What happens if you do not feel that the assessor made the proper ruling on your abatement request? If this occurs, you have the right to appeal to the State Appellate Tax Board.

In Massachusetts there are some who are exempt from all or part of their property tax obligations. Exemptions are available to those individuals that meet the various requirements in the following categories: 

  • Elderly
  • Disabled Veteran
  • Blind
  • Widows and/or Widowers
  • Minor Children with a Deceased Parent
  • Minor Children of Deceased Police or Firefighters killed in the line of duty

Applications for tax exemptions can also be obtained from your local tax assessor's office.

In Massachusetts senior citizens have also been able to claim a refundable credit on their income taxes for property taxes paid on residential property owned or rented. This law is known as the Senior "Circuit Breaker" Tax Credit, it is equal to the amount by which their property tax payments in the current tax year (excluding any exemptions and/or abatement's), including water and debt sewer charges, exceed 10% of their total income for the same year.

To claim the credit, eligible taxpayers must submit a completed state Schedule CB, Circuit Breaker Credit, with their state income return.  The form is available on the web at Circuit Breaker Credit.

As a Realtor who has covered local Metrowest Massachusetts Real Estate for the past twenty three years I often come across some really silly marketing by other Real Estate agents in regards to a homes assessed value. Things written in the Multiple Listing Service (MLS) like "What a bargain this home is priced X dollars below assessment." Most of the time the Realtor is making a very poor correlation between the assessed and market value.

When I see something like this my immediate thought is that the home owner has been paying too much taxes on their home or the assessment has not been adjusted yet.

In just as many circumstances I have seen a home with a lower assessment and a buyers Realtor try to argue that the home is overpriced because of a low assessment.

The take home message is that if you are considering buying a home, you should not rely on assessed value as a good measuring stick of market value. There are plenty of homes that are over and under assessed in Metrowest Mass. Hiring a good buyer's agent that can point point a homes true market value is always a wise move!

See also: Assessed home value v.s fair market value

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About the Author: The above information on assessed home values rarely equal fair market value wasremax executive realty hopkinton ma provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. 

Have a home to sell in Metrowest Mass? I have a passion for Real Estate and love to share my marketing expertise! 

For Metrowest Massachusetts Real Estate and homes see Metrowest Mass Real Estate. Want to have MLS access to beat other buyers to your dream home? Sign up with no obligation at my MLS Property Finder Site.

I service the following towns in Metrowest Massachusetts: Hopkinton, Milford, Upton, Southboro, Westboro, Ashland, Holliston, Mendon, Hopedale, Medway, Grafton, Northbridge, Uxbridge, Franklin, Douglas, and Framingham MA.

Click here to view homes for sale all around Metrowest Massachusetts including Framingham MA Real Estate and others.

 

 

 

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With three decades of experience, Bill Gassett is an authority in the real estate sector. Bill writes informative articles for numerous prestigious real estate sites to help buyers, sellers, and fellow real estate agents. His work has been featured on RIS Media, the National Association of Realtors, Inman News, Placester, Realty Biz News, Credit Sesame, and his own authority resource, Maximum Real Estate Exposure. Reach out to Bill Gassett for his real estate, mortgage, and financial expertise.

Comments (119)

Larry and Marilyn Mennetti
FIVE STAR REAL ESTATE - East Grand Rapids, MI

I guess we are kind of lucky in our area. Some cities are actually reducing the assessed values of homes without the owners having to do battle with them. But, the taxes being collected hasn't gone down. We have a tax system which has two values, one is the assessed value and the other is the taxable value. The taxable value lags behind the assessed/market value based upon the rate of inflation. Taxable value cannot increase more than the rate of inflation or 5%, which ever is lower. So our assessed value may go way up in good times and lots of sales etc, but taxable stays slower and lower. UNTIL...some one new buys the home then taxable is raised to match assessed value....a huge jump sometimes, especially if the seller has been in the home for a long time and the taxable has really lagged the assessed value. They did this to prevent owners from being unable to afford their home when taxes were going up at a rapid rate when home prices were sky rocketing. The collected tax will still be based on the taxable value and it can go up until the taxable and assessed finally match up ....So when you buy a home here, base your taxes you expect to pay on the price you pay for the home or assessed value, not the taxes the sellers are paying....could be a big difference.

Larry Mennetti, Grand Rapids, Mi

Mar 14, 2010 04:49 AM
Michael Cole
CPG Tours - Corona, CA

Hi Bill,

My home is worth about half of what it was a couple of years ago, and my property tax went up!!! I guess that's California for ya'.

Mar 14, 2010 05:28 AM
Anonymous
Debra Ananda

Being a Mortgage Broker and a Homeowner, I get calls on these issues weekly.  I just received my Livonia Assessment and WOW my taxable value wnt down by $336.00. Thank you Mayor Kirksey and the rest of the great administrators in Livonia MI.  Also I own a second home in Luna Pier and the taxes went down a few buck.  What a pleasant suprise these days when everything (except our home equity) is going up.  Most people have not realized what they seen on the assessment.  Look closely it is in BOLD.

It was very easy for the Municiplaities to raise assessed values when the market exploded.  They reaped hugh revenues. For those Cities that refuse to budge, what goes around comes around. 

I owned a couple properties in Detroit and they NEVER adjusted value when all the data was there.  Well that is why many are leaving the city and coming to cities that are fair and equaitable.

Good luck to all that fight their assesments! May you win the battle :)

 

Mar 14, 2010 06:27 AM
#103
Lyn Sims
Schaumburg, IL
Real Estate Broker Retired

I work out of the 2nd largest county in the U.S. and inept and crooked are some of the more lighthearted words I can use!  Assessments here are coming down with prices sometime over the next couple of years which doesn't seem to be fast enough for most homeowners. Good post that gives the homeowner valid advice & direction.

Mar 14, 2010 06:41 AM
Fred Sweezer Sr. CMI, LLC.
Hud Certified 203K Consultant - Long Beach, CA
HUD 203k Consultant

Thanks for the solid direction on real estate taxes!

Mar 14, 2010 07:41 AM
Rebecca Gaujot, Realtor®
Lewisburg, WV
Lewisburg WV, the go to agent for all real estate

Bill, terrific blog post on tax assessments. We built our home here in Lewisburg WV in 2005 for $620K it is assessed at $540K.  Real estate taxes are not as bad as compared to Mass....WOW, you pay $13K a year in real estate taxes...ouch mine are $4,480. I couldn't afford to live in Mass.

Mar 14, 2010 08:11 AM
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Our Assesor in this county has been pretty good about taking the Assesments down with the property values declining.  Oddly there seems to be a lot of scandal and investigation directed at him at this time too.  He is not popular with other elected officials.

Mar 14, 2010 09:06 AM
Kathy Clulow
Uxbridge, ON
Trusted For Experience - Respected For Results

Bill - It's great to see others here in the rain who understand the process and the fact that it is not perfect.

Mar 14, 2010 11:43 AM
William James Walton Sr.
WEICHERT, REALTORS® - Briotti Group - Waterbury, CT
Greater Waterbury Real Estate

For this to be old information, it is so dead-on, and necessary for people to get it, especially now.

Mar 14, 2010 04:23 PM
Anonymous
lori

Great direction on where to go to contest and the differing definitions. Love AR for the knowledge of others!

Mar 15, 2010 02:56 AM
#110
Aaron Silverman
SuccessfulRental.com, Bluewater Property Management, LLC and Lowcountry Turnkey Properties, LLC - Charleston, SC
Improving Real Estate Experience through Education

South Carolina just went throught major debate on our property tax law.  It was resolved... sort of.  I am not sure if it really benefits anyone.

Mar 15, 2010 09:27 AM
Deborah Fox
Villager Realty Inc - Selinsgrove, PA

Bill, I love succinct. Knowledgeable and succinct is even better. Thanks for the info and several terrific, helpful quotes!  I'll be sure to credit you..  

Mar 16, 2010 01:33 AM
Gregory Bain
Mezzina Real Estate & Insurance - Little Egg Harbor, NJ
For Homes on the Jersey Shore

I'm filling out the NJ paper work now, Bill. Assessed at $308,700 - which was over by more than 10% at the height of the market, but less than the 15% they are allowed by law to be over or under. My CMA is at $223,000 with five good comps (you are only allowed five but need at least 3). Zillow type of estimate puts the house at $258,000 which you are not allowed to use or bring up during your hearing. You can fight it yourself, yourself with an appraiser, or, hire an attorney - real estate agents are not allowed to say boo unless called upon by an attorney as part of his "expert witness" however, the board is only required to hear testimony from a licensed appraiser.

Mar 16, 2010 02:08 AM
Catherine Marrone
Integrity Residential Brokerage LLC - West Newbury, MA
West Newbury MA real estate, Essex County

Hi Bill,

I would agree that too many agents make statements trying to correlate assessed value with market value.  As you stated, the two have nothing to do with each other!  It was nice of you to outline the abatement process as many people don't realize how easy it is to do OR how to go about it.

Mar 16, 2010 09:07 AM
Judy Luna
Keller Williams Market Pro Realty - Fayetteville, AR
Technology with a Personal Touch

Bill and others,

It's probably very similar in most parts of the country with regard to the correlation (or lack thereof) between the tax assessment value of a property and the market value.

We had a semi-revolt here in NW Arkansas because in the most recent reassessments (which occur every three years) the assessed value for tax purposes was higher than the market value in many cases. We have had declining values from a few years ago when taxes went up big-time to approach market value. Properties were also appreciating (in terms of market value) by double digits. When the market turned and prices started declining, the reassessment occured, but the assessors didn't take thathe declinet into account.

We have 2 different counties in NW Arkansas which were affected in this way. It's interesting because each county handled the problem differently. Washington County actually made some downward adjustments in certain areas without people having to appeal their reassessment. Benton County largely stood firm with their higher assessments but also then had to bear the brunt of severe criticism in the media as people protested their assessments. They finally caved in many cases as well, but it was on a case-by-case basis.

Each county does have a procedure for people to protest tax increases, just as exists in other parts of the country.

 

Mar 18, 2010 03:05 PM
Wayne B. Pruner
Oregon First - Tigard, OR
Tigard Oregon Homes for Sale, Realtor, GRI

Here in Oregon our property taxes are based on assessed values, not real market value. The assessed value can only go up 3% a year. The gap between real market value and assessed value is usually quite large. This system keeps our property taxes from skyrocketing during boom times. No one likes to pay property taxes, but at least this keeps them under control.

Mar 24, 2010 04:03 PM
Beverly of Bev & Bob Meaux
Keller Williams Suburban Realty - West Orange, NJ
Where Buying & Selling Works

It's funny. This is an old post but still very relevant. It's also funny to see that this ratio is a question across many states and towns.

Mar 26, 2010 12:51 PM
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Thanks again everyone for all your comments on assessed value v.s market value. There will always be folks that do not recognize their is a difference.

Mar 26, 2010 11:53 PM
Matt Robinson
Professional Investors Guild - Pensacola, FL
www.professionalinvestorsguild.com

Most of our assessed values have been adjusted down since the market decline, and typically come in around 80% of the market value.  Great post, though.  Very informative for buyers who are unfamiliar with how tax assessments work.

Aug 18, 2010 07:46 AM
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Thanks Matt I appreciate you compliments on my article about assessed value vs fair market value.

Aug 18, 2010 07:50 AM